Aurelia Butler

On Tuesday, US senator Pat Toomey channelled the mid-20th century British economist John Maynard Keynes’ dictum that “in the long run we are all dead”. Asking Federal Reserve chair Jay Powell about the current bout of above-target inflation, Toomey said, “I know you believe this is transitory. But everything is transitory. Life is transitory.” Powell, wisely, said he would now ditch the word, acknowledging that describing high inflation as “transitory” is causing as much confusion as clarity. The phrase was originally introduced as “transient” at the end of 2020 when Powell looked ahead to inflationary pressures in the year ahead. It aimed to capture the idea that what a central bank had to consider was not a temporary spike in prices nor the “base effects” from comparisons to the year before but the bank’s ability to keep inflation sustainably at its target. In Powell’s own words, price increases “would not go on indefinitely”.Critics of the Fed’s monetary largesse, as well as its change in focus to look at “average inflation”, seized on Powell’s continued use of the word to suggest the central bank boss had taken his eye off the ball. Indeed, Toomey also asked at the meeting of the Senate committee on banking, housing and urban affairs, “How long does inflation have to run above your target before the Fed decides maybe it’s not so transitory?” The US central bank has repeatedly had to revise up its own forecasts of price growth and acknowledge that the pressures are more broad-based than it originally anticipated.Debates over the exact meaning of the term were unhelpful, as was the division of economic commentators into “team transitory” and “team permanent”. Retiring the use of the phrase will remove one distraction and unnecessary source of confusion. Aside from improving the central bank’s communication, however, Powell’s stance has only shifted slightly. While he indicated that the Fed may bring forward the reduction in its asset purchases by a few months, he said he still expected inflationary pressures to ease.Powell will probably be proved right that inflation will fade. Surges in natural gas prices may not be reversed, but they will almost certainly not be repeated. Neither will the stunning jump in used car prices that has been a key driver of inflation. Indeed while the Paris-based rich country think-tank the OECD revised up its forecast of US inflation for 2022 on Wednesday — to 4.4 per cent from 3.1 per cent — that would still mean inflation will spend much of next year below the present rate of 6.2 per cent. What matters to the central bank is any part that may not disappear. Above-target inflation may become self-sustaining if it leads to businesses and workers expecting price increases and incorporating them into their decision-making. Powell was right to say on Tuesday that this is an increasing “threat”. Accelerating the so-called taper of quantitative easing by a few months is a sensible response.The new Omicron variant is a potential spoiler. Not only is it still unclear whether vaccines remain as effective against it, but so is its inflationary impact. The OECD noted that it was likely to exacerbate supply chain problems — as well as the shifts in spending from services to goods — that have provoked shortages. On the other hand, few travel or hospitality businesses are likely to feel as if they have significant pricing power, even if a heightened fear of infection contributes to labour shortages. Powell may have banished the word “transitory” but the inflation debate is here to stay. More

Following are some notable quotes from the first day of the Dec. 1-3 conference. To watch the Reuters Next conference please register here https://reutersevents.com/events/nextSEBASTIAN SIEMIATKOWSKI, CEO, KLARNA “I am just hoping for Klarna that by the time we go public, there is a strong enough reputation for the business … as you have been able to see with somebody like (Tesla (NASDAQ:TSLA) Inc TSLA.O CEO Elon) Musk or (Amazon.com Inc (NASDAQ:AMZN) AMZN.O founder) Jeff Bezos, where it’s almost like nobody reads those quarterly reports,” he said.CARLOS TAVARES, CEO, STELLANTISOn pressure to accelerate the shift to electric vehicles: “What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle. There is no way we can transfer 50% of additional costs to the final consumer because most parts of the middle class will not be able to pay.”KYRIAKOS MITSOTAKIS, PRIME MINISTER OF GREECE “I do expect the rules of the existing (European Union) Stability and Growth Pact to be changed, taking into account the lessons of the financial crises and also the lessons of the pandemic.”NGOZI OKONJO-IWEALA, HEAD OF THE WORLD TRADE ORGANIZATION “I think it (WTO reform) will be very tough because of the lack of trust among members.”It’s absolutely important that we support multilateral trade and we don’t take it for granted.”VALDIS DOMBROVSKIS, EUROPEAN COMMISSION EXECUTIVE VICE-PRESIDENT “One can say that this year was indeed a breakthrough year for EU-U.S. trade relations.”There are clearly things to watch, but what I can say is that we are now engaging constructively so I am confident we are able to address any issues or concerns that are coming.”THOMAS SCHMALL, VOLKSWAGEN BOARD MEMBER On VW’s planned European battery cell plants: “We are talking about 25 to 30 billion (cost, in euros) … including the vertical chain of raw materials, not only the factories.”On being carbon neutral by 2050: “And this altogether brings us in this closed loop and hopefully show you that we are taking care from the beginning on, from the first step, from the mining process, to be sustainable, until the last point of battery lives and car lives and recycling.”YAT SIU, CHAIRMAN AND CO-FOUNDER OF ANIMOCA BRANDS “One way to describe the growth of the metaverse is a little bit like the growth of China 30 years ago, in a more limited fashion. “Maybe people didn’t understand it but you could see the growth factors that make China work: population growth, industry growth, all that kind of stuff. The metaverse is the equivalent.””What Facebook (NASDAQ:FB) is doing with meta … is a ‘fake metaverse,’ unless they actually have a real description as to how we can truly own it. “Until then, it’s just Disneyland. It’s a beautiful place to be, but we probably don’t want to really live there. It’s not the kind of place that we can actually build a business.”LORENZO BERTELLI, PRADA MARKETING CHIEF AND HEIR-DESIGNATE “Second-hand (fashion) is a strategy we have been investigating for more than a year. I cannot disclose too much but for sure second-hand is there. We will take it as an opportunity.”It can be a partnership with a player or it can be something more in-house, or both of them, a sort of hybrid solution like for e-commerce.”FALGUNI NAYAR, FOUNDER AND CHIEF EXECUTIVE OF INDIAN COSMETICS-TO-FASHION RETAILER NYKAA”The process of store expansion had slowed down due to (COVID-19) pandemic for a year or so. But this year we have revived our store rollout.”(Many Indians are) yet to buy their first watch, first car, first home – I think India is in a very different place compared to other developed economies.” ANDRE DE RUYTER, CEO OF SOUTH AFRICAN STATE POWER UTILITY ESKOM On shifting away from coal: “Hopefully we can persuade people to come and set up factories here, to build components for renewable energy, that will create jobs that will create demand for electricity which will turn this challenge that we have got at the moment from a vicious downward cycle into a virtuous upward cycle.”SOPHIE GOOSSENS, PARTNER AT REED SMITH SPECIALISING IN TECHNOLOGY AND MEDIA LAW “The type of rights that you are being granted on digital ownership of an NFT are slightly different. You may not have the right to control fully the asset that you own as an NFT.”NATALIE JOHNSON, FOUNDER OF NEUNO, A FORTHCOMING MARKETPLACE FOR FASHION BRAND NFTS”You don’t need to be a hardcore gamer to be embracing and playing with this new technology. It’s going to be for everyone.”JOHN MOORE, PROFESSOR OF MICROBIOLOGY AND IMMUNOLOGY AT WEILL CORNELL MEDICAL COLLEGE IN NEW YORK”It is no coincidence to most of us that (the Omicron coronavirus variant) arose in Sub Saharan Africa, where you have a lot of under-diagnosed HIV infections, or people who are immunocompromised with it.”That’s how the other variants are thought to have arisen – in immunocompromised people.”WINNIE BYANYIMA, UNAIDS EXECUTIVE DIRECTOR “We do expect that in the coming years, we might see more (HIV/AIDS) deaths, we might see more new infections as a result of these (COVID-19 pandemic) disruptions.” MEG TAYLOR, FORMER SECRETARY GENERAL OF THE PACIFIC ISLANDS FORUM On U.S.-China rivalry in the Pacific: “Everybody comes with price tags. I can see this starting to emerge now with the bases – the U.S. is now going to establish bases throughout the region.”On the COP26 climate talks: “I just expected countries to be much more progressive, especially with what the threats are to the Pacific.”ANOTE TONG, FORMER PRESIDENT OF KIRIBATI “I don’t think the global community has ever truly understood what it is that we face with the impacts of climate change. It is an existential threat.”WALTER SCHALKA CHIEF EXECUTIVE OF BRAZILIAN PULP AND PAPER MAKER SUZANO “Climate change is something we cannot procrastinate on anymore. The way for the future to finance that will be through a global regulated carbon market.”TORBJØRG FOSSUM, VICE PRESIDENT FOR GLOBAL CCS SOLUTIONS AT EQUINOR”Today there is a gap between what it costs to emit (the) CO2 and what it costs to implement CCS (carbon capture and storage). We believe that that gap is closing within the next 10 years.””We believe there is potential to break even at 100 euros per tonne.” More

ISTANBUL (Reuters) – President Tayyip Erdogan said on Wednesday Turks should act with reason and avoid panic after the lira slumped to record lows, adding that Turkey’s current 20% annual inflation could be solved rapidly.In a speech to lawmakers from his ruling AK Party in parliament, Erdogan said it was unfair to judge the Turkish economy based solely on the inflation rate. More

FRANKFURT (Reuters) – A growing number of European Central Bank governors are considering delaying part of a decision on the ECB’s stimulus plans as the outlook has been muddied by a new coronavirus variant and mounting price pressures, sources said.The ECB’s Governing Council will meet on Dec. 16 to decide whether to end its emergency bond purchases in March and how much debt to buy after that date in an effort to stabilise inflation in the euro zone at 2%. With policymakers gathering for a seminar on Wednesday, three sources on or close the ECB’s policy-making Governing Council said there was agreement on ending the Pandemic Emergency Purchase Programme in March, as repeatedly signalled by President Christine Lagarde.But some governors would favour leaving a decision on bond purchases after March to the ECB’s following policy meeting on Feb. 3, when more will be known about the impact of the Omicron variant and the outlook for inflation, the sources added.They were likely to face some resistance from the ECB’s Executive Board, which has guided for a decision in December and may be wary of upsetting bond investors looking for reassurance. Given the market pressures, another possibility was to lay out plans in December only for the first few months after PEPP ends, allowing policymakers to revisit their decision in early 2022, the sources added.An ECB spokesman declined to comment. Policymakers have grown less sure about the outlook over the past week as the emergence of the Omicron strain brought back travel restrictions and rattled financial markets.Some felt there was still no way of knowing whether the Omicron variant would result in new disruptions to economic activity – a double edged sword as that would depress demand but also curtail supply for longer.At the same time, inflation came in at record breaking 4.9% on Tuesday and showed signs of widening to more and more parts of the economy, suggesting that prices will stay higher for longer and possibly fuelling wage inflation.The emergence of Omicron has also added to the dilemma of the Bank of England, the front-runner among the world’s biggest central banks to raise interest rates from their pandemic lows.Its next monetary policy announcement is due on the same day as the ECB’s and investors have cut their bets on the chance of a 15 basis-point rate hike to about 65%, down from about 75% before news of the Omicron variant broke last week.Policymakers’ doubts were also likely compounded by Federal Reserve chairman Jerome Powell on Tuesday abandoning his claim that the recent surge in U.S. inflation was transitory and signalling the Fed might withdraw support faster than planned. DEVIL IN THE DETAILSo far the ECB has stuck to its line that inflation was mostly driven by temporary factors such as higher energy prices, supply bottlenecks and base effects from last year’s slump.But the camp of policymakers seeing growing risk that inflation would settle at or above target in 2023 was growing, the sources said.Policymakers have anyhow yet to find an agreement on how to smooth out the end of PEPP, with the debate likely to start at Wednesday’s seminar.Some policy hawks do not see a need to add to the ECB’s six-year-old Asset Purchase Programme, which is running at 20 billion euros a month. They think that deploying proceeds from maturing PEPP bonds flexibly should suffice to tame any sign of market stress.This option is not likely to find support, however, according to the sources. Others want to at least retain any unused PEPP firepower, which could total 100 to 200 billion euros, to deploy it after March.Others still favour creating an “envelope” of cash that can be spent to buy bonds as and when needed over a fixed period of time, much like in the case of the current emergency scheme.Remaining options include adding a fixed amount of money to the APP’s monthly pace or launching a new programme altogether. More

Tourism accounts for about a fifth of Greek economic output. Asked during an interview at the Reuters Next conference on Wednesday whether authorities were sticking to their 4.5 percent growth forecast for 2022, Mitsotakis said: “It could even be higher than that.”Assuming there is no major hiccups with the pandemic, assuming that the pandemic is gradually going to come to an end during the first six months of 2022, I’m very bullish about the prospects of the Greek economy.”Visitor arrivals rebounded strongly this year after pandemic lockdowns battered the tourism sector in 2020, contributing to a 9% economic contraction.Mitsotakis said the Greek economy was poised to grow by more than 7% this year, adding: “We have already made up all the lost ground from the pandemic.”Greece required three international bailouts from 2010 to 2015, together worth more than 260 billion euros, to prevent bankruptcy. It returned to international markets in 2017, but its sovereign paper is still considered speculative grade.Mitsotakis said he expected the country’s credit ratings to return to investment grade “at the latest” by early 2023. To watch the Reuters  Next conference please register here https://reutersevents.com/events/next/ More